tv On the Move Bloomberg August 23, 2016 2:30am-4:01am EDT
manus: welcome to "on the move." 7:30 a.m. in london, 8:30 in berlin. we are counting down to the european market open. alongside me is caroline hyde. i'm manus cranny. life after brexit. german, french, and italian leaders lay out their views on the way forward after the u.k.'s vote. matteo renzi says europe is not the cause of all problems, for the solution. a strong foundation. pretax profit at persimmon rises nearly 30% in the first half,
while the ceo tells bloomberg that, despite brexit, the market is robust an. and the dollar loses ground as the market waits to see what janet yellen will have to say at jackson hole. caroline: and manus, all the market waits to see what the pmi data will be today, from france, germany, the eurozone. it looks like there is risk appetite, looking at the futures market. we are called higher after yesterday's slight selloff in the dax, cac, and ftse. a bit of risk appetite ahead of jackson hole, and perhaps suppression of concerns about the u.s. ranking up hikes. it comes down to this -- the mediating bond traders seem to be happy with don's. it is the fx traders that are skittish. the dollar index is down, the market retreating.
yesterday was rather gung ho in terms of stanley fischer's comments. today it is all about positive thought. wirp on your bloomberg says 24% chance of a hike, 51% in december. the dollar is vulnerable, according to mitsubishi trust. oil is down, dropping for the first time in eight days, the biggest loss in three weeks. six attends antifreeze. msci emerging markets, blackrock goes bullish. e, $61.23, dubbed the darling of 2016 by citigroup. .5%. up. there is a breath left in iron ore. let's get out to juliette sally. what's going on? allianz's chief
economic adviser says federal reserve officials need to consider the cost of keeping interest rates low. he tells bloomberg there is a risk of "financial instability down the road" because of an extraordinary monetary policy. he says it was the strongest argument for trying to slowly normalize rate, because otherwise the fed would contribute to excessive risk-taking. cleaning up after the first typhoon to make landfall in the area for 11 years. it was classed as a category one storm that brought high wind and heavy rain. the airport was forced to suspend operations with the control tower was evacuated, and japan airlines canceled 337 domestic flights. more than 70,000 passengers are still stranded. all hishte is losing endorsements after he admitted to making up a story about being robbed at gunpoint while at the real olympics. mattresse
makers as they are ending their relationship, and speedo says it will donate a portion of his paid to charity that works with four children in brazil. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. this is bloomberg. caroline? caroline: thank you very much. let's talk politics. the leaders of the three egg us euro area economies have given a joint news conference, steeped in symbolism, to lay out a vision for the eu after britain's exit from the bloc. ocalan merkel used the announcement -- uncle of merkel used the announcement to promise a safe europe. >> [speaking german] >> we have agreed to take these steps, which includes the upcoming meeting, because we respect great britain's decision, but we of course would also like to make clear that the other 27 member states can count on a prosperous and save europe, we can comepy that
again and again for a visit to individual member states in order to inform ourselves and make clear that there is that diversity, and a common ground on which this european ground consists on. anna: let's get more from brussels, were ian wishart is standing by. a lot of work went into this meeting. give us a few more of the details they outlined. ian: well, i think i will disappoint you, because there weren't many details at all. this was a lot about symbolism, having the leaders of the three biggest eurozone countries getting together to block the course for europe without the u.k.. but on substance, it was very little. they talked about about security, working together to fight against terrorism. they talked a lot about economic growth. but in actual fact, the concrete steps they will take is still very scant. it remains to be seen, i think, what they are going to do,
because they certainly didn't go into any detail yesterday. manus: that is what they want to try to do -- good morning, it's manus -- convince the member states that the eu will be fine without the u.k. this is about messaging, isn't it? ian: that's true. it's about them saying, look, we are the core of europe; we are france, germany, italy. we are the real core of the european union. even if the u.k. goes, we can so stick together. but it's more than that. they don't really have a choice. u.k. has made its decision; it is going to leave. it's more about what kind of europe do we now want? they don't want a repeat of what happened in britain. they don't want a repeat of that everywhere else in other countries. some countries are wavering with the referendum somewhere else, in the netherlands or eastern europe, and they want to say, look, we are listening, we know europe has to change, we need to
work together to work out how it has to change, how we need to respond to those voters who think that the european union is in for them. -- isn't for them. manus: absolutely, pushing back against that right move. ian wishart, thank you. let's welcome our guest host for the next hour into the and asation, from c clacla good friend. james bevan, thank you for joining us. >> great to be here. manus: a great set piece, the tripartite of power in europe. they need to convince their members that life will be fine without britain. we will get pmi data today, and that is probably, we think, going to reflect that state of play. >> i agree, but they also need to convince themselves. it's a fundamental tension that lies at the heart of eurolan and the restd of the eu. the german savings rate remains exceptionally high.
that puts them on a collision course to spend more, to balance out the current account surplus. debatevery reasonable that they are having, because there is such a driven interest. they said at the periphery, why do you need germany to spend money? it's because they want a fast trajectory of growth. why are you saving? we need to put money aside for the future. the future is not necessarily going to be smart. we have aging demographics. two views, polar opposites. anna: james, do you believe in the eu remaining a 27 country conglomerate? and what is your future if we do see these ongoing divisions that seem difficult to put together, to put a square hole in the around key? >> i'm not only worried about the future of the eu, because the eu itself is a corporate
body politic that has remarkably little control, other than common standards over the rest of its membership. the eurozone, the single currency bloc, is a far more interesting challenge, and i think the agenda makes more sense. challenges,bout the the single interest rate, the fiscal imperatives, it's ultimately unsustainable. i'll only therefore repeat that it's actually find to say you want euro currency. -- your own currency. what: that's in some ways mervyn king warned about. he said he read one of the best articles ever, the one salient question -- europe in itself is at a huge, structurally unsound
position, and that takes you back to what happens next with the currency, if you believe that europe is fundamentally flawed. is back against the euro -- what does that do for a market perspective? >> i am very nervous of the outlook for europe from an investment perspective. i see much better investment opportunities despite relatively elevated market levels in the united states. the consensus of expectations. manus: james, thank you very much. james bevan, with us for the next hour from ccla. caroline? caroline: coming up, we will be discussing the u.k.'s first-half pretax profit, dropping. we hear about the post brexit landscape as nigerian militants discuss an end to hostilities. plus, cut and run.
u.k. homebuilder persimmon has recorded what it called a robust first half. pretax profit was up 29% on a 12% rise in revenue. the company says that while the brexit vote created more economic of urgency, customer interest has since been solid. blackrock is betting on emerging markets. the world's largest asset manager has upgraded developing nation stocks to overweight from neutral, starting an improvement in fundamentals and stability in the dollar. last month it raised its outlook for emerging market bonds. blackrock sees more room for inflows with the msci emerging markets index set to rise for a third straight month thanks to rebalance and commodity prices. at leastisse ceo has one investor that keeps getting bigger on his turnaround. harris associates has increased its stake to more than 10%. last summer, he restructured
businesses to shift away from securities trading and focus on wealth management. lost aboutompany has 45% of its market values this year. and that is your bloomberg business flash. manus? manus: thank you very much. the crude retreat. oil falls for a second day today, extending its losses from a seven-week high. $48, nymexng at $47 on the nose. guest,et to our bloomberg markets middle east anger with the chart of the hour. yousef? yousef: good to see you. let me break this down. for a change in not necessarily nigeria is driving sentiment in the last few hours, specifically nigerian oil production, because the prospect is some of it could be coming back online. the latest news is that we are
awaiting comments from the nigerian government on a proposal to end hostilities. it would, of course, be a remarkable step forward. the thing is that we have had this in the past, these signs of reconciliation, so the analysts at commerzbank are urging caution. what you are looking at here, the yellow line, is nigerian oil output, down from over 2 million barrels at the beginning of the year -- a 25% drop. 500,000 barrels off the top. that is an amount of supply that could come back if they do reach some sort of agreement. goldman sachs, just leave you with that note, are saying that opec failed six times to reach some sort of freese agreement; maybe the seventh times the charm. but they are still saying that oil prices are likely to remain in the $45-$50 per barrel range until next summer. manus: thank you very much. that could well be the main draw
w. let's bring in james bevan. oil looks as if it is stuck. it is almost like on recall, recall, recall. $60 is the top; every time we run their, we run out of steam. put we get a freeze? would it matter? >> i still see oil floating around $45 per barrel, on the premise that supply will respond if prices rise, and if it responds, we get more out put. and now we have alternatives becoming more economically viable, a lot more technology for oil extraction. if you were to say, what is the investment response? is to look at the entities coping with a low oil price, and also the entities that will benefit, that have splendid free cash flow.
so potentially go long on certain oil stocks. what about the oil price in general? what about countries that are looking appetizing, because emerging markets have been on the rebound. >> well, emerging markets are very interesting and very broad diaspora. i like to be more specific in emerging economies and i still stick to the premise that, in asia, we have a fantastic galaxy of world-class market opportunities. i will be looking at taiwan semiconductors, in the climate of ongoing deflation. because although the next six months is rising inflation, the median or longer-term is about excess capacity. i want to be exposed companies and opportunities that know how to make money for shareholders in the climate of slow growth. manus: slow growth, for pricing
trends. healthy with this. we have had six quarters of growth in the u.s.; money has not been flowing into europe. where are the best sectors that have those two dominant hallmarks? >> let's back up on where we are in terms of u.s. if you take away the energy and commodity sectors, the underlying earnings trends have been relatively robust. i think next year the s&p 500 can get to 2300 to 2400 points. i am quite bullish. if you said to me, where is the action most likely to be suspicious? i do think it is the amazons, facebooks, because they are able to benefit from the disruption they are causing in the market, able to monetize it for shareholders. at the same time, traditional retail, macy's, it's pretty clear they will have a real struggle. they have created excess capacity.
all the money that was created as a result of quantitative easing is in part supported by markets and asset prices. some of that has created capacity, which is now too much of market. anna: james, give us a sense of where we go ahead of jackson hole. we are revving up for hints at rate hikes. a my bloomberg, we are seeing ramp in the probability of a rate hike, heading toward more than 50% by the end of the year. but in the blue, borrowing costs remain resolutely low. u.s. treasuries aren't listening to perhaps,, the buildup in the cause for a rate hike. where do you feel this goes? >> i see a bifurcation in terms of fed policy initiatives. we have 45 statement in the last week alone that clearly point to the premise that the fed is beginning to normalize policy. the question is, what does normalization really mean? oftentimes, we say it means 10 year yields going back up.
somehow that is another pipe dream. the fed's managing down expectations of where long-term rates will be. i certainly expect mrs. yellen to use her speech to say, yes, we will normalize policy, because the u.s. economy is strong, but critically, the peak will be slower. manus: do you think she will come out as strong? do you think she will be as strong in her rhetoric as we have seen from fischer, her deputy? >> we have not just seen fischer, we have seen fed members putting out press statements. this is almost unheard of. i can't think of another occasion when a fed official has put out a press statement saying he thinks interest rates should be heightened. i think therefore there is a degree of concerted moving up the market, but with a much lower peak. manus: james, you stay with us. james bevan from ccla. coming up next, we are minutes away from the start the trading day.
they delivered a first-half profit that was up by 29%, revenue of 12%, robusta trading in the first half. brexit vote created more economic uncertainty, but customer interest remains robust. visitor numbers are up 20% in the last year. of course, this is all about what happens next in terms of the sentiment in the u.k. housing market, caroline, and in terms of the regions, going beyond the bubble of the bubble of the bubble, not that u.k. house prices are in a bubble, persimmon plans to increase regional build activity. there you go, caroline. caroline: i know, is fascinating. also, brexit doesn't seem to be hurting persimmon. it doesn't seem to be affecting the pmi numbers we are expecting out of france, still relatively locked in. we could see growth in terms of services, and it is close to
manus: good morning and welcome. this is "on the move." i'm manus cranny, alongside caroline hyde in berlin. we are moments away from the start of the european trading day and caroline, you have the morning brief. caroline: german, french, and italian leaders lay out their views on the way forward. renzi says europe is not because of all problems, -- is not the cause of all problems, but a solution. pretax profit rises by nearly 30% in the first half for persimmon. despite brexit, the market is robust. oil life lower and the dollar
loses ground. -- oil slides lower and the dollar loses ground. meanwhile, we ramp up into the open. it looks as though we have got some risk appetite out there for the riskier assets. the stoxx 600, trading flat. we are opening up on the ftse 100 only up .1%. .1%. cac 40, up let's break it down for you and get a look into the individual movers, and indeed, how gilts opened this morning. reporter: thank you, caroline. we are getting the french pimmi data for august. services are rising and four july, the composite was at 50.1. economists surveyed were looking for 50.4.
we have a slew of data this morning. we have germany in 30 minutes and on :00 a.m. u.k. time, we -- 9:00 u.k. time, we get the european numbers as a whole. july was the best we have seen in six months for the eurozone as a whole. this will be closely watched for how europe's business and economy as a whole is faring post the grexibrexit vote. we get the full eurozone at 9:00, really a test for how european business is faring post the brexit vote. the stoxx 600, your benchmark index, altering. this is the pricing because the index only picked up slight -- this is surprising the cuts yesterday, the index only picked
up slightly at the close. this brings me to next, we want to look at brent, below $50 per barrel. it went from bare to bull in just three weeks, caroline. it is hovering around $49 per barrel this morning went just last week it traded above $51. so, clearly oil is driving the market here. finally, let's bring in some of the companies driving the trading today. persimmon reported pretax profit up 29%, more than 350 million pounds. that stock is now up more than to present. the ceo said he some robust trading performance in the first half, even when the brexit vote created uncertainty. a french government report omitted important details. that stock is down and under
pressure this morning more than 3%. finally, let's look at the watchmakers out of switzerland. slightly under pressure. this is as much exports fell 14% in july from one year ago. that data is out this morning from the federation of the swiss watch industry. watch out for those movers this morning. caroline: fascinating stories. let's have a little check in on how the euro is performing. it looks as if manufacturing was relatively weak. is euro-dollar trading up .2%. let's get out to ccla investment management cio, james bevan. what do you make of the pmi readings because it does not same all doom and gloom post brexit? >> it is much more indicative of sentiment in the stock market.
we have had a relatively strong correlation in recent months between the gyrations of equity pricing and then, what the pmi says. there is very little correlation between the pmi and the real economy. againsthis is the euro the dollar. caroline had that one day. this is the challenge though for draghi. he did not do anything int h the wake of brexit, very much waiting to see what happened. this data will probably validate his caution. "caution," say his this is a man going to invade the corporate bond markets and completely shift the market for risk assets. if you buy corporate debts, you reduce the average cost of capital. he has said he will participate i primary markets, as well as
secondary markets. if you issue that, you will have to expect u.s. companies will want to buy. that's is going to drive the equity markets still further. i am nervous we are looking at a price ramp operation, rather than real economic medicine. manus: one of the stocks we were watching at the open was persimmon. ceo told anna ed wards the first half was robust and he anticipated a good autumn season. >> we are specifically first-time buyers. nevertheless, we have not seen any real change in buyer behavior. people are still pretty keen to buy andy landers are keen -- and the lenders are keen to lend.
the affordability is there. it is quite often cheaper to purchase that it is to rent at the moment. the fundamentals are still there. the underlying market is still strong. we have not seen any particular change in buyer behavior. anna: what about the change in the availability of land for you to purchase? are you taking the opportunity to purchase land cheaper in the post brexit environment? >> over the last few years, we have put ourselves and a strong position at persimmon. got 93,000 plots in the short-term. so, we are well positioned in terms of land availability across the u.k.. but yes, i think we see good opportunities out there still to buy. keen to continue to invest in the business, as we
can see the market continuing to be good. to invest in further land for our business to push forward. caroline: meanwhile, persimmon leads the charge on the ftse 100. let's get out to james bevan. james, how do we read these tea leaves? the builders seem to be saying, amid the uncertainty, we are doing pretty well. >> as long as there is a constrained supply, that is. we had a material shift in the 1930's when neville chamberlain was the exchequer at the time. vast expansion of building, particularly around the big cities. it led to a big increase in economic activity levels. as well as a significant move
down and house prices. of course, the politicians don't want to move down and they will not shift the planning environment. the planning environment remains tough and supply remains limited. i forecast the house prices will remain strong. manus: one of the underlying supports in the housing market is sterling. in sterling, does that perpetuate with the fiscal re set? are gilts at sterling at risk in autumn? >> i would draw the distinction sterling.tls alts and mark carney wants a weaker plan. the current account deficit is that record highs. in the last century, it has never been higher. it has only been higher once in the last century, and that was during a bad period during the
second world war. during the first world war, everybody said we would have a terrible deficit because of the world war. he needs to bring the cash in, but he needs to continue to support the bond market. i do worry that the only people who will buy bonds, other than the pension funds regulatory risk, are those who think they can sell back to the central bank at a still higher price. manus: absolutely. and there was a piece on bloomberg talking about pension liabilities in this country ratcheting higher post brexit. james, you are going to stay with us. caroline, take it away. caroline: up next, steady as she goes. u.s. treasury volatility dips ahead of janet yellen's action. the rateok ahead to
persimmon is leading the charge. it is up .4%. arclayselping berkele group. let's check on the downside, too. in the red, the french carmaker. it seems emissions details have been omitted from the government report. this was reported by the "financial times." this is the third worst performer on the stoxx 600. but overall, we are in the green and up .6%. let's dig into bloomberg first word news now. reporter: alliance's chief economic advisor says the federal reserve officials need to consider the cost of keeping interest rates low. he told bloomberg there is a risk of financial instability down the road because of extraordinary monetary policy. he says this is the strongest argument for slowly trying to normalize rates because
otherwise, the fed is country bidding to incessant risk-taking. tokyo is cleaning up after the first typhoon to make landfall in 11 years. it was a category one storm, but still brought high winds and heavy rains. were suspended when the control tower was evacuated. flights were canceled. is losing hise endorsements after he admitted to making up a story about being robbed at gunpoint when he was at the elevates. partnerships are being ended with the u.s. swimmer. $50,000 of his pay will be donated to a charity for children in brazil. global news 24 hours a day, powered by 2600 journalists in more than 120 countries around the world.
this is bloomberg. manus: thank you. now, the majority of contemporary stock moves can be explained by macro factors. with broken relationships across asset classes, that is. and traders better get used to it, according to our guest, james bevan. james, you have started to prefer quality overgrowth. you have just made this very clear point. quality is driving your argument at the moment. >> i worry we will not get the growth people talk about. people are wondering friendly will get back to trend growth. -- people are wondering when the will get back to trend growth. we have difficult demographic trends across many economies. it is very difficult to see productivity rising in the
context of what is going on. we have a relatively low level of participation in industries. caroline: you like amazon, james. i have on my screen, just how heavy the hype is for bill gates. he continues to be worth more in this scenario. we see the most valuable companies in the united states now being dominated by technology. is technology going to continue to outperform in the u.s.? >> and showed. if one were to look at -- it should. amazon,ere to look at how many times would one have been able to say that they could buy a company with genuine long-term growth prospects and a greater yield than government securities.
the second issue is, if amazon is able to deliver on the long-term growth numbers, it will offer earnings yield worth more than we have seen in a decade's time. if i am correct in saying this, that is. had two ceo's have discussions. they understand recent meetings between the cio's have been fruitful. the agreement is said to be possible in the next couple weeks. they are making progress toward prices. bayer many to raise their bid price to around $135. that is not confirmed in the statement, thus far. they are close to making progress on the price and a termination fee. the dreaded termination fee, of
course, if the deal falls apart. bayer and monsanto are getting closer to reaching an agreement. have met several times. there have been a series of constructive meetings on putting these two major global agricultural companies together, bayer and monsanto. of course, you got to think this has been done at a time of lower commodity prices. cout toet up to caroline. cutill all come down to the off penalty if the deal were to fall apart. caroline: there is a potential for rising of the bid. the german company is currently falling on the market. my screen is showing that the share price is dropping from
previous highs. bayer was trading higher, but we have seen a plummet when we get the news they are looking at closing on a deal. let's get out to james bevan. more mma to come, james? >> we have a lot more mma to come after remarkably low interest rates and credit have purchase encourage the purchasef other companies. as long as the earnings yield is greater than the net cost post tax, corporate treasurer is will be continuing to buy back. so, i think we will see a squeeze up and prices. i am just looking at bayer, the immediate reaction is down by 0.5%. the view from the market is you could have a $1.5 million
termination fee. is this the only way to grow in a low growth environment? >> we worry so much about growth. when one thinks, why bother? [laughter] >> no, but seriously. if you have a sensible well-run business, this pursuit of growth at any cost in terms of risk participation just seems bonkers. i looked at the bayer-monsanto deal and i don't see the industrial logic that is required. manus: interesting. one of the other companies you do like his glencore. shares have been sold, yesterday. >> i think glencore has had a fantastic run up. they were late to the party and i was very critical of that. but i do think the share price has now run too far. if you were to say, what is the fair value for glencore, unless
they are able to sort out the $18 billion target at the end of the year, lest they can participate in the upturn in price more fully, i worry the share price might trickle back down to 140 pounds in 12 months time. 188.5, that is up on the day. a lot of the is driven by the bayer rally. james, thanks for being with ccla investment management. thanks for joining us. anna: up next, we will be waiting for janet. volatility in the u.s. treasury bonds have shown some signs of life. is this a good time to get into the trade? we will discuss. this is bloomberg. ♪
manus: the u.s. treasury market is showing sudden jittery signs over what exactly will janet yellen say. treasury volatility jumps for three straight days after reaching a 20 month low. that was earlier this month. during us to discuss -- joining us to discuss the market is the bonds and fx news reporter for bloomberg. rally in the treasury market,
trading down to a 20 month low, but it could be in for a turn. >> it is very confusing for people right now. bad that yellen will say, "yes, we are going to raise rates," or are you going to believe that the officials are split? it is a very tough call right now. i don't think there will be a massive u-turn right now. caroline: we have had confusing moves in treasuries, on f ischer's comments, in particular. what is the difference in view points from different geographies? >> initially on fischer's commen ts, people picked up on employment. tosaid inflation is close where we want it to be.
they took that as a bullish sign and a sign that the fed is ready to raise rates by the end of this year. productivity isroductivel low. what can the central bank do to boost the economy? that did confuse people. manus: it all comes down to the nuances of what she says on friday. i thought i would bring this up to five years. we have traveled a very long way. we're still not back to the lows of 2014. >> that is true. that is the problem. when we ask, can you explain this to me, they say, "let's wait on what yellen says." she is not going to do a complete u-turn and say, "we are ready to raise rates," but at the same time, fsicher and
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♪ brand new apps, shows to go, ♪ ♪ awesome internet that's super whoa... ♪ ♪ everything is awesome xfinity. the future of awesome. caroline: welcome back to "on the move." 30 minutes into your trading day, we are trading higher. we are looking out for the pmi data. germany, we are getting 53.6 for the manufacturing preliminary august numbers. 53.3 is the number for services, worse than what was expected. your composite number is a miss, as have been the opposite of what we saw in france. have a look at the euro at the moment. we have been tracking it. we have been hitting session highs post the french pmi data. we are coming off of those highs at the moment post the german
pmi data. let's dig into the stock moves, and the european moves post the pmi data. what stocks are we looking out for? >> the first is unicredit, one of the biggest names on the stoxx 600 this morning. head welopment fund ill go to milan today. unicredit has been considering selling its entire stake of the polish lender. you can see it right there, that stock is up 1.3%. and persimmon, the biggest gainer on the stoxx 600 this morning. the housing builder here in the u k reported a pretax profit of 29%, more than 350 million pounsd. we spoke to the ceo today and the company says they saw robust trading in the first half of the year, even as brexit uncertainty put pressure on the market.
that stock is nearly up 4% now. and then, we have bayer. we just got a red hot headline across the bloomberg terminal that bayer and monsanto are getting closer to striking a deal. these companies have been in talks to create what would be the world's largest pesticides and seeds company. the deal could come within the next couple weeks. we will be watching bayer, as well as monsanto, when that stock opens later this morning on wall street. manus: policy makers have a rate decision at 12:00 noon u.k. time. we are expecting a 25 basis point point to the overnight lending rate. turkey has slashed this rate for five consecutive months as the diplomatic tensions rise. emergings now is the
markets reporter for bloomberg news. constantine, great to have you with me. talk about the market. the market is expecting a 25 basis cut, which would take us to 225 basis points cut this year alone. >> that is right. that is what the market is pricing in right now. there is probably going to be a 25 basis point cut to the overnight lending rate today. we are likely going to see the central bank continue this march cycle that began in as it moves to simplify its monetary policy i narrowing its interest rate -- by narrowing its interest rate corridor. caroline: of course, the concern has to be about inflation. is it sacrificing at the moment, the inflation target to keep foreign costs in such an environment? >> that is right. i mean, headline inflation,
missed expectations for a second month. but it is worth noting that the thisal bank had flagged last month and said this was likely to be temporary. whichcore inflation, strips a volatile prices like food and energy, was unchanged last month. all of this comes as the lira has rebounded quite strongly after falling to a record low following the coup attempt. there have been some inflows into bonds again. risk sentiment is back on. there is a sense the central-bank might have room to keep easing, despite this inflation concern. manus: constantine, thank you very much. set,ng us on commerzbank's head of fx
research. comingthanks for in. it we can see trading demonstrably lower than the overnight rates. in terms of turkey, you say it is already trading. >> if you look at ratings of investment grade, it is definitely trading up to junk status within the cps space. caroline: some of your notes, peter, looking into the reasoning for it being a bit bearish on turkey, you are not so worried about politics. you seem to be worried about the slowing growth in the country. peter: that is right, caroline. if you look at the politics involved, it seems after the initial coup intent, we saw an increase up to 2.90.
we saw the lira come under strong depreciation pressure. obviously, that has changed. from a political perspective, i don't think much has changed. for me, it is my reason to be bearish on turkey. these are the consequences of what has happened. you are already seeing a slowing economy in turkey. that is one of the reasons we will eventually see downgrade later this year. not for the political reasons per se, but for the fundamental economic reason. broader conversation, if we look at stocks and currencies, stocks are near a o ne year high. the william spoke last week and says the fed is in play. you can see these real, quite
violent reactions every time you get a fed sort of hot headline. you would still say, and the stories say, money is still racing into em. one morehe fed hikes time, do you think that momentum will continue? peter: i think it will. is it a question of lower rates for ever, or low rates for a while? we can see this standard push-pull model pushing toward higher em yields. that is why i think this week's symposium will be interesting for investors. week'se: what about this gathering of oil price moves? we have an unofficial opec meeting coming up and oil is trading lower coming off of that
bull market. caroline,hink for me, we have had these opec summits time and again over the last year and a half. will they freeze production, will the increase it, etc.? over the last nine months, it has traded between $30 a barrel and $50 a barrel. opec is no longer the main producer in the oil market. it is u.s. shale. we have got low oil prices. and we will have them for a while. this is a structural change in the market. this means emerging-market commodity producers, they are in for a reasonably tough time over the coming years. manus: the lovely line you have gotten your notes is, "kerry ocn at all costs." with that in mind, is it south
africa? is it turkey? you have some very clear views of the avoiding russia at the moment? but where is the biggest carry? peter: turkey i don't like so much. i don't think it will trade particularly well for obvious reasons, but i think south africa looks interesting. it is one of the best performers this year. if you look at the front end of the curve, in local currency indicated that they have no plans to cut or to increase rates. so, that is pretty good from a carry perspective and i don't see that changing anytime soon. manus: you are a very obliging guest. here we go, the rand -- let me just take this clutter out on the left side. you have got the rand.
you are not so endeared towards the ruple, are you? peter: we have had an enormous rally. but the question continues. if you are going to see the oil price come lower, i don't think the momentum is there for russia to trade more strongly. and we have the same issue for ukraine as well. manus: that can put a lid on anything and soak any price of oil at $50. ppeter kinsella, always good to get your thoughts. caroline? caroline: fascinating emerging-market chat, manus. up next, the newest candidate in the french presidential election looks a lot like the old one. we are in paris next with a look at the challenges for nicolas sarkozy. this is bloomberg. ♪
caroline: 43 minutes into your trading day and this is "on the move." only four stocks are falling, one of them bayer. here is the bloomberg business flash. reporter: caroline, thank you. negotiations between bayer and monsanto are said to be advancing. according to people familiar with that matter, the companies have made progress on that matter. the ceo's have had a series of constructive meetings in recent weeks and could reach an
agreement in the next four might. representatives for both companies the client to comment. persimmon has recorded what it called a robust first half. pretax profit was up 29% on a 12% rise in revenue. the company said that while the brexit vote graded more economic uncertainty, customer interest has been solid. >> people are still very keen to buy and the lenders are keen to lend. people understand that the affordability is there. if you want to get onto the housing ladder, it is often cheaper than it is to rent at the moment. the fundamentals are still there. the underlying market is very strong. not seen anyn particular change in buyer behavior. reporter: the world's largest asset manager has upgraded
stocks to neutral. it raised outlook for emerging-market bonds. blackrock sees more room for inflows, with the emerging-markets index set to rise for a third straight month thanks to easing concerns on the pace of the fed's rate hike. credit suisse's ceo has at least one investor that keeps getting bigger on his turnaround. the stake has increased to more than 10%. thiam has restructured businesses to shift away from securities trading and focus on wealth management. however, the company has lost about 45% of its market value this year. that is your bloomberg business flash. manus: thank you very much. former french president nicolas sarkozy says he will run to reclaim the title. his popularity ratings have
trailed those of the republican party rival. and for the better part of a year, sarkozy joins a crowded field. the primary will be held at the end of november. for more, we have more from paris. heat up.e and politics caroline: yes, everybody was expecting a comeback of nicolas sarkozy. the uncertainty was about the timing and it does seem like good timing when you consider that the campaign of his main somehow the right wing lost a little bit of his steam over the summer and the left wing is still divided. nicolas sarkozy has not declared himself yet. you got the candidacy of the former economy minister, the possibility of the current economy minister, and the
increasing popularity of prime minister. now, nicolas sarkozy said in 2012, remember, that he retired from politics after losing the election to president hollande. but he has slowly made a comeback in the last few months. last year, he took over the presidency of the party. of course, now he has to win the primaries that will be held at the end of november. the popularity of nicolas sarkozy at the moment nationally, is about 28%. but in his own party, it is 55%, still lower than his main rival, alain juppe. and the popularity of president hollande is just that 18%, according to the latest poll. caroline: give us a sense of what that entails. what are the highlights of his program? >> it is kind of a book program.
it was kept secret for the past few months, a very well-kept secret. everything for france. on the economy front, he wants to reduce the unemployment benefit by 20%. and by another 20% after 18 months to encourage people to go back and find jobs. very on the economy front, appealing for many, a reduction in income taxes for 10% for everyone as soon as next summer. and a very hard line on terrorism. he wants to put in jail all those people who have been listed as radicalized, so a very hard line on the subject. we can expect a lot of debate on all of these subjects. he will have his first meeting in the southeast of france on
thursday. now, the question is whether nicolas sarkozy will try to appeal to the right of the right-wing in order to lure some of the national voters, or whether he will be able to win over some of the center, who might be tempted to go back to francois hollande. caroline: the ramp up for politics as they come back from their summer holiday. manus? "countdown,"t on could we be getting the first indication of a brexit that on businesses in the monetary union. eurozone data is due. this is bloomberg. ♪
this performer yesterday, and best performer today. persimm -- persimmon, outperforming today. and look how the french car company, emissions details were omitted from the french report. that is the worst performer on the stoxx 600. there is your market overview. let's get you highlights for the rest of your trading day. anday u.k. time there is interest rate decision coming out of turkey. then, the u.s. new home sales. manus: caroline, thank you. first, we have a mixed picture on the state of the economy from france and germany this morning. services in germany had their worst performance in 15 months, while in france, services take up ever so slightly. now, the eurozone pmi figures are due in a few moments. for more we are joined by our
economics reporter. what can we expect from the eurozone after the mismatches we have had this morning? >> as you said, france was better than expected overall. overall, germany was worse than expected. economists we surveyed predicted that the eurozone gauge will basically be unchanged ever so slightly weaker than the previous month, even what we saw and germany and france. one gain might offset a decline somewhere else. caroline: it is still expansion that we are expecting across the eurozone, jana. give us a sense of how much a brexit is drip feeding into the numbers? do we see a brick could affect at all on the european growth? effect atee a brexit all on the european growth? >> maybe not on the overall
numbers, but one thing to look at is the overall orders guage. they're, you are likely to see some impact of brexit, a general shift in confidence. the overall index includes output gauges, for example. we can expect, especially manufacturing companies, might still work on the voters they had before, but the most forward-looking components of the index, they will show how the economy is holding up. manus: let's talk about business confidence. how is that? is it worse than what we can see in these headlines? >> it is difficult to say at the moment. there seems to be a little bit of a disconnect between what is going on and what companies expect. forecast example, the was rate for the second time this year in the earnings season that just passed.
the at the same time, the ceo warned of risks in the future. coming out in november, we were warned, could see the effects. ratherakers are confident. it really is something we need to take a look at in the future and see how things pan out. manus: jana, thank you very much. caroline? caroline: we have got to be sticking with us after that sum up. francine lacqua will be discussing the eu, brexit, and much more with the majority leader of germany's democratic union. this is bloomberg. we are higher on the stoxx 600. we have oil prices trading lower
francine: europe is a solution, not the problem. charts out aande future without britain. the pmi service shows services countering the slump has driven -- has brexit affected the european number? a signal for sarkozy. he wants to return as president. he has a months to overtake the front runner. -- he has three months to overtake the front runner. ♪ francine: welcome to "the pulse." live from bloomberg european headquarter right here in